Midway Games chairman to resign

Nicastro has held position since '96

The upheaval at Midway Games Inc. intensified Friday, with longtime Chairman Neil Nicastro saying he intends to resign that post after next week's annual meeting.

Media magnate Sumner Redstone has taken control of the Chicago-based video game-maker that was long run by Nicastro family members, buying shares to increase his stake to more than 68 percent, from less than 30 percent about 13 months ago.

Although Midway officials have said day-to-day operations have been unaffected by Redstone's taking control, he has shaken up the board, reaching a deal to remove five current directors and add two new members, including his daughter, Shari.

The departure of Nicastro, who has been the company's chairman since July 1996, means that more than half the current board is stepping down.

"I believe that Midway is a tremendous company with a bright future, but for personal and professional reasons, the time has come for me to move on," he said in a statement.

A Midway spokesman said he could not elaborate on Nicastro's decision.

Redstone--who has reported owning more than 20 percent of Midway stock since 1998--praised "the dedication and skill Neil has brought to his work for Midway over the years" and said a successor would be announced after Thursday's annual meeting.

A spokeswoman for Redstone's National Amusements Inc. said he would have no further comment about Nicastro's departure or Redstone's takeover of Midway.

Nicastro, who has been on Midway's board since 1988, was the company's co-chief executive with his father, Louis, from 1994 to 1996, when he became sole CEO. He left that post in May 2003, during the firm's fourth straight fiscal year of net losses.

His departure from the chairman's post is not necessarily a surprise under the circumstances, Kaump said; what was unusual was remaining chairman after leaving the CEO job.

"That struck me as being the oddity," Kaump said.

Both Louis and Neil Nicastro also are ex-CEOs of Midway's former parent company, Waukegan-based WMS Industries Inc., where they remain on the board. Redstone also owns a substantial stake in WMS.

Redstone's months-long buying spree of Midway shares has confused several analysts, wondering why he didn't simply make a bid for the entire firm last year, when the stock was trading below $3 a share.

"It's strange. It's bewildering," said Kaump, who has a "sell" rating on Midway shares, citing its valuations. "Why you would go and just buy up shares in the fashion he has is somewhat mystifying."

Redstone has been quoted as saying he intends to pump more resources into Midway, including more creative workers to design hit games.

Kaump said that talent and the content they produce are key to success in the video game industry. "Those are the two must-haves to make the wheels turn," he said.

The run-up in Midway's stock price from Redstone's heavy buying--it closed Friday at its highest level in more than two years, at $11.61, and is up more than 40 percent in the past month--has allowed several insiders to sell shares at substantial profits.

In April, Neil Nicastro owned nearly 5 percent of Midway's stock, but he sold more than 1 million shares last month for $9.5 million, cutting his stake to about 3.6 percent, including options.